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Maintaining compliance in a Covid-affected auditing process

The end of the year means it is time for the financial audit. However, this year teams will be struggling with multiple changes as a result of Covid-19, writes David Thorley, director of customer development at Fiscal Technologies

Even during a normal year, the auditing process at the end of the financial year is frantic and demanding. However, the new challenges that many have faced since March have increased the pressure.

The expected rise in internal fraud, on top of changes to working environments and team structures, has put additional pressure on finance teams. So the question turns to how financial departments can maintain compliance during the audit process.

Covid challenges

Before tackling this question, it is important to understand what issues financial departments have been dealing with since the pandemic hit in March.

Tackling fraud

Before Covid, internal control weaknesses were responsible for nearly half of incidences of fraud. However, pressures on supply chains, such as urgency to secure supplies during a crisis or emergency, increase fraudulent activity. Therefore, it is no surprise that we have seen a 400% rise in procurement fraud relating to the Covid threat. Major factors in this rise have included time pressures and fear of shortages, which have caused organisations to override established procedures.

The prevalence of fraud during the pandemic has shown that organisations have weak fraud-prevention systems in place. For example, the Finance ERP and P2P systems on which many businesses rely – often described as the heart and lungs of a company – are known to have vulnerabilities that lay companies open to fraud by insiders and third parties alike.

Structural/operational change

With Covid hitting seemingly overnight, many organisations were forced to adjust their operational structures to align with government guidelines with little to no planning. With all but essential workers working from home, organisations across the country had to adapt to a new working environment, which included operational and structural changes.

Structural change leads to errors, and opens a company up to an attack. Organisational change across the P2P function – systems, centralisation, decentralisation, acquisitions and mergers – increases the risk of duplication, error and fraud. At times of great change when systems are being configured and resources stretched, errors and omissions occur and processes take time to adapt. This creates a window for fraudsters to target transformation projects – often something they accomplish with ease. But how?

During ERP migrations the Master Supplier File (MSF) is frequently left untouched and simply copied in its entirety from the old to the new system. Commonly, an ERP migration project only copies open transactions to the new system, leaving historical intelligence behind. Critically, the important transaction history is often lost. Essentially spotting irregularities relies on comparing suspect transactions with this self-same historical data. This means duplicate payments or payments sent to a fake address can slip through the net.

Reliable solutions

End-to-end payable assurance solutions are key to helping tackle the challenges experienced by finance departments.

The correct solution will enable organisations to stop payment errors before they happen, but also provide root cause and analysis, enabling organisations to go back and find where processes have not been adhered to. It also allows them to find where their compliance may have been breached, and where trends – even down to individual transactions – may not be following those processes.

Providing a vast range of data that supports best practice but informs changes to processes as well as informs of compliance breaches, allows a financial department to trust the procedure they have in place and trust in the way the system works. This is a vital step, considering that many organisations have to process thousands of invoices per month. Therefore, having an independent, secure and powerful solution to check and validate everything that goes through an ERP system will provide greater value, as well as benefit compliance and governance, and reduce costs.

Moving forward

Maintaining compliance during the auditing process is never easy, and this year it will be even more difficult. But adopting the correct end-to-end payable assurance solutions for your business will make the process less time-consuming and more accurate.

The depth of forensic analysis provided by the right solution can result in high-risk transactions being identified that had previously been missed, as well as spotlighting transactions that are unusual.

Although this year has certainly not been easy for anyone, it remains important to continue to adapt and tackle the challenges that come our way.


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